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PBR

PBR looks like it could be setting up nicely for a trade to the long side. Lets take a look at the price action and turn to the charts:

Sector: Energy > Industry: Oil and Gas - Integrated

Current price: $44.62


On the top chart you are looking at the 1 year daily chart. Notice that until recently PBR was in an identifiable uptrend. This uptrend was breached when PBR crossed below about $45 (where the last higher low was put in). It had a nice run from 25.89 to 53.46 and a pull back is to be expected. If PBR can cross back over 45 then I think it can resume its uptrend.With an entry around $45 and an a target price back up to around $49.

Next lets talk about the bottom left chart. We are looking at a 20 day 30 minute time frame as we drill down on the stock. Notice that PBR gaped up from about 44 which you can see was a minor level of resistance, so we may be able to use that as support now.

Now the third chart is a 5 day 15 min chart. I am looking at this more micro chart to see where the best price is to get in. A lot of time I try to anticipate a move only to get shaken out because I was not in at the right price, but the idea was right. Or I get in early experience a pull back and at the first sign of green on the position I take profits which is why I think I hardly reach my profit potential in many of my positions. So I think that the best way for me to play this position is to either wait for a test of that 44 level and possibly down to 43.50 or for price to confirm the uptrend by taking out the recent high of 45.14 which is also around resistance of 45 on all time frames. I am leaning towards the latter.

So lets formulate the plan:

Entry: 45-45.25 (Really looking for a breakout of 45-45.15)

Stop: 44.28 (Last higher low put in 15 minute chart, will move up as new higher low is put in to trail my stop)

Target: 49

Position: 5 April '10 45 calls @ $1.85 or better (at 45 option pricing model says they have a theoretical price of 1.82). They are currently trading at $1.59

Lets take a look at the risk profile and price slices of PBR:




Holding Period: 2-3 weeks

Upcoming Fundamental catalyst's: Earnings on 3-10-2010

Since earnings are right around the corner I may wait to see how the stock reacts to earnings even if it hits my entry price.

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